4. Guidelines on credit risk management practices and accounting for expected credit losses

4.1.1 Application of the principles of proportionality, materiality and symmetry

4.2.1 Principle 1 — Management body and senior management responsibilities

The management body²¹ and senior management of a credit institution are responsible for ensuring that the credit institution has appropriate credit risk management practices, including an effective internal control system, to consistently determine adequate allowances in accordance with the credit institution’s stated policies and procedures, the applicable accounting framework and relevant supervisory guidance.

²¹ Various management body structures can be observed in EU Member States. In some Member States a single-tier structure is common, i.e. supervisory and management functions of the management body are exercised within a single body. In other Member States a two-tier structure is common, with two independent bodies being established, one for the management function and the other for the supervision of the management function.

This section provides guidelines on aspects of the ECL requirements in the impairment sections of IFRS 9 — (i) the loss allowance at an amount equal to 12-month ECL; (ii) the assessment of significant increases in credit risk; and (iii) the use of practical expedients — that are not common to other ECL accounting frameworks and should be read in conjunction with the other sections of these guidelines.

4.3.1 Loss allowance at an amount equal to 12-month ECL

4.4.1 Principle 1 — Credit risk management assessment

Competent authorities should periodically evaluate the effectiveness of a credit institution’s credit risk practices.